Grocers, fast food shops blame ethanol for higher food prices

As the debate on ethanol continues, food retail companies have picked a side claiming government subsidized corn-based ethanol is to blame for higher food prices.

As drought conditions have eased, higher corn yields are expected in 2013. The higher production and lower corn costs have livestock producers and ethanol plants amping up production, which, in turn, raises the demand for corn.

Some fast food companies say the increased demand for corn brought on by ethanol plants is the reason menu prices, namely beef, pork and chicken, are higher.

"It's harder every day to offer great value because our costs are skyrocketing," Lisa Ingram, president of White Castle, recently said in Washington. "In fact, since the RFS became law our cost for beef has increased by forty-seven percent."

Fox News reports the sentiment is mimicked by Wendy’s franchise owners. Ron Ross, owner of four Wendy’s restaurants in southern California, says an industry study found higher costs, supposedly impacted by the RFS, have taken $25,000 in revenues from each of his stores.

Because competition limits how much of the costs can be transitioned to customers, Ross says he’s had to cut back on employee bonuses and delay new store plans.

Higher beef prices can’t be blamed solely on increased corn demand created by ethanol plants. Two consecutive years of drought forced cattle herds to shrink to a 60-year low, which pushed wholesale beef prices to record highs earlier this summer.

Bob Dinneen of the Renewable Fuels Association told Fox Newssome companies are using the RFS as a scapegoat and the real culprit is higher oil prices which increase the cost of transporting commodities.

The Renewable Fuels Association says average corn yields have increased by 36 percent over the past 20 years and those averages could rise another 29 percent by 2020.

The association says the ethanol process utilizes only the abundant, low value starch and creates a high-value livestock feed as a byproduct sold to producers.